If you’re finishing up your degree or recently jumped into the professional world with a great idea for a business, you’re not alone. Entrepreneurship is more popular than ever before, with new businesses springing up in every sector.
Starting a business isn’t as hard as it once was. Today, funding is readily available to those who need it. But just because you can get financing doesn’t mean it’s right for you. You have to know where to look. Nav provides you with the information and resources you need to get started in the right direction.
Get a fundamental understanding of startup loans
The landscape of small business startup loans can be confusing—especially if you don’t have a PhD in finance. Before you fill out any applications, be sure you understand the full scope of small business loan options and terms.
From business credit cards to SBA loans to conventional loans to microloans, each type of business financing comes with its own terms, interest rates, fees, advantages and disadvantages. The more you know about your options, the more confident you’ll be when the time comes to decide what type of loan is right for you.
There’s also a lot of terminology to get familiar with before you start applying. Understanding the language and terms being discussed will give you the edge in making good decisions about what you’re applying for. It’s also a good idea to look at sample loan applications and start reviewing your full financial picture before you jump into a situation where you’re signing on the dotted line.
Nav Loan Resources
- The Ultimate Guide to Small Business Loans
- 7 Options for Small Business Startup Loans
- How to get a Startup Loan with Reasonable Interest Rates
- SBA Loan vs. Conventional Loan: Which Is a Better Fit for You?
- How to Establish, Build & Get Business Credit
- Know These 8 Things Before You Get a Business Credit Card
- How to Get a Small Business Loan
Preparing for financing
The first and most important part of applying for a traditional startup loan is knowing how much you need and calculating the amortization of a loan based on the annual percentage rate (APR). APR is really the best apples-to-apples comparison you’ll have to compare the true cost of loans. You’ll also need to have a general breakdown of what the financing will be used for, how long it will last and how you intend to pay it back (with interest).
Once you know how much you need, how it breaks down and where to get the financing, you’ll need to start preparing to apply.
Check your credit a minimum of 30 days before you apply for a loan, to clear up any anomalies working against you—including high credit utilization, derogatory marks, unreported inquiries and more. You can get your personal credit report by creating a free Nav account.
For startups, poor personal credit can drag down your chances of getting favorable financing. Don’t give up! For LLCs, the quickest and easiest way is to get a net-30 account from a reputable vendor. Vendor credit is consistently reported to credit agencies and so long as you use it and pay it regularly, your business’ credit score will benefit.
Once your credit score is polished, you’ll need to turn your attention to collateral. Any secured small business loan is going to require collateral. There are ways to obtain an unsecured loan, however the financing is typically less and there may be more stipulations during the application process.
Nav Financing Resources
- Business Loan Calculators
- Why You Should Wait 30 Days to Apply for a Loan
- How to get Business Funding Without Using Personal Guarantees
- 3 Vendors That Will Help You Build Business Credit
- Business Credit Scores and Reports
- Do I Need Collateral for a Business Loan?
Securing funds outside of a traditional loan
If a traditional small business loan isn’t in the cards for your startup, there are plenty of financing options to explore—business credit cards, microloans, private loans and vendor lines of credit among them. These days , alternative online business loans may also be a good fit. They tend to have higher APRs than traditional loans, though, so be sure to understand the true costs. .
If you’re willing to give equity in your startup or have a polished idea that’s ready for market, you might also explore angel investing, venture capital opportunities or crowdfunding.
Finally, don’t underestimate the power of your own personal wealth. Savings, equity, lines of credit or even enthusiastic friends and family can provide the upfront capital you need to get your startup off the ground!
Succeeding in spite of student loans
There’s one big question on every college student’s mind when starting a business: “Can I start a business with student loans?”
Student loans can feel like a burden—especially on your credit. But, they shouldn’t deter you from starting a business. In fact, if your loans are federal loans and you’re eligible for an income-based repayment plan, you may be applicable for better financing options than you think!
If you’re denied for a loan, focus on bootstrapping and try to keep your business and personal finances separate. Showing you can build a business even with loan debt will convince future lenders of your trustworthiness.
Nav Student Resources
- How to Start a Business When You Have Student Loan Debt
- Can Student Loans Hold You Back from Entrepreneurship?
- How to Start a Business With Student Loan Debt
Get out there and start your business!
Feeling confident about funding your small business? Don’t wait for someone else to get the capital that will get your idea off the ground! Here are a few resources to get you started in the right direction when it comes to finding a lender and applying for financing:
- Nav’s Small Business Grant: $10,000 To Take Your Business To The Next Level
- Small Business Loans & Financing Options
- Business Credit Card Offers
The Nav team is always here for you if you have questions. We’ve helped more than 400,000 small business owners understand their financing options, so they can get the funding they need to succeed.
This article was originally written on February 27, 2019 and updated on January 20, 2021.